Not much time has passed since Interactive Brokers announced zero commissions for trading stocks and ETFs on US exchanges, a price war broke out between brokers.
The other day Charles Schwab announced the same step (which even before that had a small commission for the trade, considering its size – only $ 4.95). Moreover, they also reset commissions for trading options, and not just for stocks and ETFs.
Investors did not like it. If IBKR grew on the news as opposed to the rest of the market (then investors quite logically assumed that the only free major online broker would quickly increase its market share), then the reaction to yesterday’s news was a nightmare for the sector. The author of the news, Schwab (SCHW) and IB lost almost 10% each, while competitors Ameritrade (AMTD) and E-Trade (ETFC) lost 16-25% each. Moreover, these two did not even say anything about this, and the news from Schwab apparently took them by surprise.
Officials immediately made statements that "the customer comes first", "the price should not be an obstacle to investment" and "we will be competitive in the new conditions." That is, in fact, they accepted the challenge of entering the price war.
Investors now scratch their heads, trying to understand the future profits of online brokers, their sources and stability. And for fans of catching “falling knives”, it seems that an interesting time has come.